Why HODL May be Hurting Your Profits
(Please note that I am by no means an expert at trading nor crypto in general, but I have had the privilege of learning from the legends in this group for the past 7-8 months, and with many of them stepping back a bit recently, we have a responsibility to help the next crop of crypto enthusiasts. So here is the first installment of some things that I’ve learned.)
The Importance of Closing Positions
And Why HODL May be Hurting Your Profits
Learning when to sell and when to hold was one of the most difficult aspects of crypto trading for me, because those are often the moments most influenced by emotion. I typically take a long position in a coin after research and planning an entry point, and set a buy order to catch my target price, so entering a trade is by its very nature, emotionless and fact-based. Closing positions (selling when referring to long positions) on the other hand involves many factors that have the potential to be heavily influenced by emotions.
Holding coins for a long duration is a very viable investment strategy and I maintain several long positions that I hold through thick and thin, but the concept of HODL, which started as an accidental spelling error and morphed into a crypto meme, has now become misunderstood by the new crypto enthusiasts to represent a badge of honor, regardless of technical analysis, market indicators or profitability. If you have been around for a minute you have seen this ideological shift… emotional attachment to specific investments, rabid shilling, and an unwavering belief that if you don’t HODL XYY no matter what (until it moons) you have weak hands.
The dilemma is that no one has ever quantified "the moon". What percentage gain is the moon? What Market Cap represents this moon? As such, we never actually get there because we fail to define our investment goals at the outset.
• Until you close the position, you only have theoretical gains.
• It is not only about how much you gain, it is about what you do with those gains.
• Establish a concrete investment strategy for each investment you make.
I am going to give a recent case-study example of what I mean by all of this:
A few weeks ago I took a good sized long position in TRX at about 200sat. I immediately set a 25% sell order for 1000sat and another 25% sell order for 1800sat. Both positions were closed during the pump to the recent TRX ATH of 2000sat. I posted my strategy in a Tron group and was mocked for having weak hands, and will miss “the lambo moon landing” which is fine with me because my blended exit point was 1400 sat, resulting in a modest 700% gain on the closed position, and I still have 50% of my original position. Did I miss the possibility of more gain? Yes, but remember until you close the position, you only have theoretical gains.
Remember too, it is not only about how much you gain, it is about what you do with those gains… My 2nd TRX sell order was executed last Thursday right before BTC started to move causing a very brief sell-off on Friday. I flipped all of the TRX gains into VEN at a 21000 sat dip (effectively doubling my position) and VEN promptly recovered back up to 25000 and eventually set a new ATH over the weekend.
By establishing a concrete strategy BEFORE entering my Tron position, I did not get caught up in the FOMO that accompanied the pump to 2000 sat, because like nearly everyone else, I get emotional and excited and would have most likely waited until it was too late, and I would now be HODL a full position of 1000sat TRX and a half position of 29000sat VEN.
This was a long post but I just want the new members to see the benefit of establishing clear investment strategies before each investment. Remove the emotion from the situation. Understand the difference between taking a long term hold position and the meme HODL. Don’t let your attachment to a coin, company or technology stop you from taking your profits and utilizing them to increase your potential wealth.
Credits to: Alex Moody